Thoughts on the Market
Episode: A New Playbook for Equity Investors
Date: February 3, 2026
Host: Serena Tang, Chief Cross Asset Strategist, Morgan Stanley
Guests: Anderselman (Head of Applied Equity Team), Jatanya Gandhari (Deputy CIO, Solutions & Multi Asset Group; Head of Macro & Thematic Research, EM Equities)
Overview
This episode explores the evolving landscape for global equity investors in 2026, highlighting the shift from narrow market leadership to broader opportunity sets. The panel examines behavioral and macroeconomic cycles, the impact of synchronized monetary and fiscal policy, the concept of “capped real rates,” and where to find global investment opportunities beyond the U.S. Key themes include the importance of balancing macro and micro signals, the “great broadening” beyond mega-cap tech, and the structural changes underway in global markets.
Key Discussion Points & Insights
1. Market Cycle Perspectives: Late, But Not Over
[00:33–02:23]
- Anderselman challenges the consensus view of being in a recovery-fueled bull market:
- Emphasizes the “behavioral cycle” whereby investor pessimism post-2022 has now shifted to greater optimism, signaling late-stage but not end-of-cycle dynamics.
- "Bull markets die in euphoria. And so I think it's late cycle but it's not end of cycle." — Anderselman (01:57)
- Early cycle bears were marked by heavy outflows from equities, while now, more optimism means heightened volatility and compressed returns.
2. Unusual Monetary + Fiscal Policy Support
[02:23–03:45]
- Serena Tang notes the rare alignment of easing monetary and fiscal policy outside recession periods.
- Anderselman explains why this dual stimulus is sustaining equities, especially in pro-cyclical sectors:
- "Last time I checked the page one of the investment Handbook says don't fight the Fed. And so you have monetary policy easing... Equities do well when the Fed is easing. And that's one of the reasons why I think it's not end of cycle." — Anderselman (02:43)
- Sectors poised to benefit: finance, industrials, technology, and smaller-cap stocks.
3. The Age of Capped Real Rates
[03:45–05:18]
- Jatanya Gandhari introduces the principle of structurally capped real interest rates:
- Pushes back on the “linear” assumption that tariffs equate to persistent inflation and higher rates.
- Historical precedent: Whenever U.S. public debt spikes (Civil War, World Wars, GFC, COVID), real rates tend to stay negative or suppressed due to debt sustainability.
- “There was too much linear thinking...tariffs equals inflation equals higher rates. Now...economic relationships are rarely linear.” — Gandhari (04:14)
- Markets (not just central banks) will enforce limits on real rates because of high debt levels.
4. The Great Broadening: What it Means for Equity Leadership
[05:18–08:43]
- Gandhari contends market leadership is expanding—no longer just mega-cap “AI trade” winners:
- Value creation is shifting from model-building to applied AI (“enablers to adopters”).
- Two global AI ecosystems: high-cost U.S. innovation vs. cost-conscious China, each with unique supply chains.
- More global breadth ahead, as domestic cycles inflect in many economies.
- “If last decade was about concentration, now it's going to be about breadth.” — Gandhari (05:33)
- Anderselman sees lower valuations and wide industry adoption as analogues to the internet boom—AI’s benefits will spread broadly:
- "To me, a broadening out and looking at lower valuations, it is in many ways safer than saying this is the technology winner and this is technology loser." — Anderselman (08:09)
- Comparing to 1993 internet era, many expected “winners” didn’t materialize; broad adoption mattered more.
5. Navigating Macro vs. Micro: A Blended Approach
[08:43–10:15]
- Anderselman stresses integrating both top-down macro signals and bottom-up stock selection:
- "Two thirds of a manager's relative performance comes from macro...much of a return of an individual stock has to do with things beyond just what's happening fundamentally." — Anderselman (09:18)
- Macro signals such as Fed rate cuts must inform positioning, but fundamentals remain crucial for stock selection.
- Recommends capturing both the “2/3 macro and 1/3 micro.”
6. Non-US Equity Opportunities: Evolution of Portfolio Positioning
[10:15–13:43]
- After multi-year U.S. dominance, recent data show leadership shifting to Europe, Japan, and select EM:
- Anderselman: Previously, global pro-cyclical/value signals were absent. In 2025, they emerged outside the U.S., justifying increased non-U.S. allocations.
- "It's a long winded way of saying, look, I think what the story of last year was the US did just fine, but there were parts of the world that did better and I think that will continue in 2026." — Anderselman (11:54)
- Gandhari offers a tour of global opportunity:
- ACWI ex-U.S. is heavy in industrials/financials (vs. tech-dominated U.S.).
- Europe (core and periphery), Emerging Europe, and North Asia (supply chain, tech, defense, biotech, shipbuilding in Korea), India (structural growth), LatAm (improved policy credibility) all stand out.
- “So lots of opportunities scattered all over the world at this stage of the economic cycle and their market cycle.” — Gandhari (13:40)
Notable Quotes & Memorable Moments
- [01:57] Anderselman: "Bull markets die in euphoria. And so I think it's late cycle but it's not end of cycle."
- [02:43] Anderselman: "Last time I checked the page one of the investment Handbook says don't fight the Fed... Equities do well when the Fed is easing."
- [04:14] Gandhari: "There was too much linear thinking...tariffs equals inflation equals higher rates. Now...economic relationships are rarely linear."
- [05:33] Gandhari: "If last decade was about concentration, now it's going to be about breadth."
- [08:09] Anderselman: "A broadening out and looking at lower valuations, it is in many ways safer than saying this is the technology winner and this is technology loser."
- [09:18] Anderselman: "Two thirds of a manager's relative performance comes from macro...much of a return of an individual stock has to do with things beyond just what's happening fundamentally."
- [13:40] Gandhari: "So lots of opportunities scattered all over the world at this stage of the economic cycle and their market cycle."
Timestamps of Key Segments
- 00:33–02:23: Market cycle—behavioral view, late vs. end of cycle
- 02:23–03:45: Dual monetary & fiscal support and sector opportunities
- 03:45–05:18: “Capped real rates”—post-debt surge, complex inflation/rates dynamics
- 05:18–08:43: Market broadening & AI—leadership shifts, historical analogies
- 08:43–10:15: Macro vs. micro—blending investment approaches
- 10:15–13:43: Shifting global leadership—why non-U.S. and where, emerging markets, sector weights
Summary
The episode delivers a nuanced discussion on 2026’s investment landscape:
- We’re in a late-stage, not end-of-cycle market characterized by behavioral optimism and increased volatility.
- Unique “double-barrel” policy support keeps equities on firm ground, favoring cyclical sectors.
- Structural factors—like capped real rates due to high public debt—shape the context, while “the great broadening” marks a pivot from concentrated mega-cap winners to more democratized market gains.
- Successful investing requires integrating top-down macro signals with stock-level insights.
- Non-U.S. and emerging markets—especially areas with improving fundamentals and unique sector exposures—hold expanding opportunity as market leadership globalizes beyond the U.S.
This balanced, real-time debate offers a strategic playbook for equity investors to embrace both breadth and depth in portfolio construction throughout 2026.